Investment Decision Rules - Evaluating Projects with Different Lives
3 important questions on Investment Decision Rules - Evaluating Projects with Different Lives
For what purposes is the equivalent annual annuity (EAA) used?
To compare projects with different live spans
What is the equivalent annual annuity?
The level of annual cash flow with the same present value as the cash flows of the project
How do you calculate the equivalent annual annuity of a cash flow?
You determine the cash flow needed to receive the NPV of the project over the time span of the project
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